NorthWestern Energy believes a unanimous vote among owners is needed in order to close Colstrip, according to a lawsuit filed May 4.
But four other utilities that are plaintiffs in the lawsuit argue the parties can close one of the electric generation units in Colstrip — or both of them — with 55 percent of the ownership vote.
That disagreement is being arbitrated, and a bill signed into law by Gov. Greg Gianforte — retroactively effective to Jan. 1 — tries to mandate negotiations take place in Montana.
The complaint alleges that requirement in Senate Bill 265 is contrary to a longstanding agreement among all the owners of the Colstrip plants about how and where arguments get settled, so the dispute has landed in U.S. District Court in Billings.
“The bill is not coherently connected to a broad societal interest because it focuses on purely private rights, such as the location where the parties’ arbitration will take place and the rules under which their dispute will be arbitrated,” reads the complaint.
In the lawsuit, plaintiffs Portland General Electric Company, Avista Corporation, PacificiCorp, and Puget Sound Energy ask the court to declare that SB265 is unconstitutional and contrary to the contracts clauses of the U.S. and Montana constitutions.
The complaint names utility NorthWestern and Talen Montana, a power producer and operator of Colstrip, as defendants.
However, in a separate case filed just one day later, Talen Montana alleges arbitration must be held in Montana in part because of the importance of Colstrip to the state.
“Since the 1980s, the people of the state of Montana and the City of Colstrip have relied on the Colstrip Steam Electric Station for jobs, power and prosperity,” reads the complaint.
“Now mandates by the states of Washington and Oregon have put Colstrip’s future at risk. Four of Colstrip’s co-owners … are attempting to force Colstrip to close by the end of 2025, in obedience to Washington’s ban on the sale of electricity from Colstrip and other plants that generate power from coal.”
The May 5 complaint names as defendants all other owners, Avista, NorthWestern, PacifiCorp, Portland General Electric, and Puget Sound Energy. The lawsuit was filed in Yellowstone County District Court.
The fight over who gets to decide to close Colstrip is taking place because owners based in Washington and Oregon are supposed to eliminate coal in their portfolios. Last year, NorthWestern tried to buy out one of the other owners and increase its Colstrip shares, but the controversial deal didn’t end up coming to fruition. Regardless, owners need to figure out the future of Colstrip.
May 4 lawsuit filed by Portland General, other parties
The plaintiffs and defendants in the case collectively own the coal-fired electric generation units in Colstrip, and a 1981 agreement governs the ownership.
The lawsuit states the agreement provides for arbitration to occur in Spokane, Washington, “before a single arbitrator” in a proceeding under the law of Washington. It also states the Superior Court of the State of Washington will appoint an arbiter if the parties can’t agree on one.
But the bill, sponsored by Sen. Steve Fitzpatrick, R-Great Falls, clashes with that contract in providing the following: “An agreement concerning venue involving an electrical generation facility in this state is not valid unless the agreement requires that arbitration occur within the state before a panel of three arbitrators selected under the Uniform Arbitration Act unless all parties agree in writing to a single arbitrator.”
In the lawsuit, the plaintiffs note that NorthWestern and Talen both supported SB265 in legislative hearings. But they allege the bill is unconstitutional, citing Article II, Section 31 of the Montana Constitution: “No ex post facto law nor any law impairing the obligation of contracts … shall be passed by the legislature.”
The companies note the law would create practical problems as well. Requiring three arbitrators instead of one would “result in a tripling of costs” and also slow the process because of the extra time required to hire the extra people and coordinate schedules.
Additionally, the existing agreement requires disputes to go to an arbitrator who has “demonstrated expertise in the matter submitted,” the complaint said. But that requirement doesn’t exist under the Montana Uniform Arbitration Act.
“SB265 is not an appropriate or reasonable way to advance any significant and legitimate public purpose,” said the complaint. “No public purpose is served by changing the location, the number of arbitrators, the criteria for selecting the arbitrator … and the state of the judge that selects the arbitrator.”
In a statement, NorthWestern Energy said it does not comment on pending litigation. However, the monopoly utility noted its interest in a resolution.
“NorthWestern Energy initiated arbitration to answer the question whether or not a unanimous decision by all Colstrip Power Plant owners is required to close the plant,” said NorthWestern in a statement. “NorthWestern Energy’s desire is to have that question answered as soon as possible. Colstrip is a critical resource for Montana for grid stability and for NorthWestern Energy to provide reliable, affordable energy service to our Montana customers.”
Talen Montana could not be reached for comment Friday afternoon via a media relations form on its website.
May 5 lawsuit filed by Talen Montana
Talen argues the defendants are “trying to compel arbitration of Colstrip’s fate in Washington by a single arbitrator to be chosen by a Washington court, in disobedience to controlling Montana law requiring arbitration in Montana before three arbitrators.”
One section of the complaint is called “Colstrip’s importance to Montana.” It notes Montanans rely on Colstrip for power and also economic opportunity.
“Colstrip is vital to Montana’s economy,” the complaint said. Citing a University of Montana Bureau of Business and Economic Research report, the lawsuit said if Colstrip closes, the state will lose some 3,300 jobs and give up at least $1.2 billion in tax and non-tax revenues.
“The consequences of shuttering Colstrip are dire and there is no good reason to do so because it is producing electricity consistent with prudent utility practice or ‘PUP,'” the lawsuit said.
Talen argues that it has certain obligations in running Colstrip as well: “As operator, Talen Montana is guided by the parties’ (agreement), which provides that Colstrip should continue to operate as long as it is capable of producing electricity consistent with PUP and not at an arbitrary date determined by factors peculiar to a particular co-owner or group of co-owners.”
But the complaint notes the other parties want arbitration to occur in Washington, before just one arbitrator, and that four of them sued on April 14 in that state to compel the proceeding to take place there.
“The filing came on the same day Avista, PacifiCorp, Portland and Puget failed in their aggressive lobbying effort to defeat Montana Senate Bill 265,” the lawsuit said. But that bill is now law “and invalidates the arbitration provisions relied on” by the other owners who sued in Washington.
NorthWestern provided notice on Feb. 9, 2021, that it intended to initiate arbitration to resolve the dispute over whether the other parties could force Colstrip to close in 2025, according to the lawsuit.
The plaintiff asks the court to declare the ownership agreement among the parties is invalid and asks the defendants to comply with the new law, which “applies retroactively to petitions to compel arbitration made on or after January 1, 2021.”
The case has been assigned to Judge Ashley Harada.